After several consecutive days of extreme dumps, the crypto market crashes once again with widespread losses of over 10%, surprising shifts occurring within the crypto leaderboard.
Market Briefing
A lot has happened with the market today, many breaking solid expectations that have been going on for months, so only some of the significant changes in the market will be gone through. This means that many other changes will be missed, but they are not expected to have any value to the ones focused on.
The first major change is within the top 10 according to the market cap. Binance Coin (BNB), the centralised exchange native cryptocurrency which is known to have established itself in 3rd place, has fallen to 4th for Tether (USDT). USDT within this week has beaten BNB a few times to come out in 3rd, but in those cases, the margin was small enough for BNB to quickly recover back to its original position. But currently, the margin is much wider at over $10 million, BNB needing to have a lot of movement to come back to its original position.
That is not the only movement that has occurred. XRP (XRP), which usually floats mostly in the 4th place, has toppled down to 7th - another unexpected event. It has also gone down under $1, currently sitting at about 91 cents, which has not been seen since the beginning of April.
USD Coin (USDC) is also in 9th place, personally believed to be in a much lower position around 15th. Its 24h volume is over $7 million to account for about 40% of its total market cap, indicating a lot of activity with USDC. Talking about 24h volume and market cap with US stablecoins, USDT has much more activity than USDC. Its 24h volume is more than triple its market cap, suggesting that a lot of people are looking to move into different cryptocurrencies, using USDT as the middle man. The market cap for USDT at this current time is about $58 million, its 24h volume about $194 million.
What is interesting to find is that when going to the cryptocurrencies with the most 24h volume, many of the US stablecoins come up, namely USDT, USDC and Binance USD (BUSD) - plausibly the 3 most popular US stablecoins in the market. This indicates that the current market is experiencing a lot of movement, with many people turning to US stablecoins.
When looking at other stablecoins, a movement in them is also visible. For example, Dai (DAI) is currently sitting at 28th, which is thought to be much lower in the leaderboard previous to this widespread crypto market crash. Other examples include TerraUSD (UST - 55th), Paxos Standard (PAX - 67th), TrueUSD (TUSD - 74th), HUSD (HUSD - 81st) and Fei Protocol (FEI - 87th), all of which are believed to have been in much lower positions before the crash. This indicates that US stablecoins have become much more popular in this crash.
With BNB's position, Cardano (ADA) is very close to overtaking, with approximately a $20 million margin between the two cryptocurrencies. The margin was closed recently, ADA taking over BNB for a little while, but BNB has now recovered and overtaken ADA. The margin is now widening for a stable position, currently sitting at around $400 million.
Reasons For Crypto Market's Crash
As with all previous crypto market crashes, there a great variety of reasons detailing the cause of the crash. However, it is important to note that the cause of a market's crash is much more complex than one reason, a network of causes interlinking with each other to give the result, not just one. Below are some of the most significant causes of the crypto market crash, some relating to the previous crashes as they likely have brought on a domino effect.
One of the biggest reason for this crypto market crash is the restrictions for crypto with China. Bitcoin (BTC) mining has been banned by the Chinese State Council, which is huge for the crypto industry. According to the University of Cambridge (https://cbeci.org/mining_map), 65.08% of BTC mining electrical consumption comes from China, following in 2nd place the US at 7.24%, which is a huge gap. By having a Chinese ban on BTC mining, that 65.08% is gone, which means that 65.08% of processing power for the BTC blockchain is gone, thus having a detrimental impact evident in the crypto market crash. This BTC crash flows onto other cryptocurrencies to make it widespread. However, it is important to note that there is a benefit to the ban on BTC mining for China, obviously because otherwise, they would have not placed it. This ban in China ensures that its electrical consumption is cut to promote greener environments, a major issue in the air quality in China. It also makes a more balanced BTC mining community, cutting the gap down that brings up better decentralisation.
China also recently announced from its financial committee a crackdown on crypto mining. This is assumed to not only apply to BTC but other cryptocurrencies as well, which is a contributor to the current market crash that is widespread. The Chinese financial committee has reasoned that the crackdown is needed to "resolutely prevent and control financial risks." The financial committee Hong Kong has also joined the party, looking at regulations for crypto investing. This regulation is proposed to only allow professionals with $1 million or more in their portfolio to invest in crypto, others restricted to do so, which means that many people in Hong Kong would be looking at cashing out from their crypto. This may relate to the influx in US stablecoins.
Further Reading
coinnounce - Bitcoin crashes as China announces a crackdown on crypto mining. - https://coinnounce.com/bitcoin-crashes-as-china-announces-a-crackdown-on-crypto-mining/
cryptodaily - China’s State Council Implements Bitcoin Mining Ban - https://cryptodaily.co.uk/2021/05/Chinas-State-Council-Implements-Bitcoin-Mining-Ban
be[in]crypto - Hong Kong Announces Proposal to Ban Retail Crypto Trading - https://beincrypto.com/hong-kong-ban-retail-crypto-trading/